Contrarian Oil Indicator Index for 02-09-09

Entries for 02-09-09

Neutral

Bullish

Bearish

Based on Saudis reducing output, an enthusiastic BUY is recommended.

X

A post asking if USL is a better play than the more common oil ETF USO.  A link to a Seeking Alpha article article is provided.  This participant is certain that oil prices will rise, and is merely seeking the optimal vehicle for trading oil.

X

Another question about USL versus USO.  Both are long oil funds, so this entry is clearly bullish on oil, since the questioned asked is “Which is better?”

X

A complaint that CNBC is pushing oil, but a belief that oil prices will fall before they go up is expressed.

X

A trader took profits on his short-term oil play, which was made on the advice of another trader.  He expects prices to drop over 5% before he will jump back in.

X

A short-term trader says to buy oil on the passage of the stimulus bill.  His recommendation is to sell it for a quick 10-15% gain.

X

In this entry, an observation is provided.  Overseas markets pumped up oil,  which popped when trading began in the US.  However, institutions sold oil  later in the day into what is supposed to be naïve investors.  The author advises that one should not be greedy when trading crude.  No opinion is expressed about near-term prices.

X

Once again, a question about the difference between USL and USO is posed.  Again, the entry is bullish because the assumption is made that one should be buying one or the other.  Both are long oil funds.

X

A dire warning is provided, with a prediction that prices will collapse while CNBC continues to provide positive comments.

X

Both oil and gasoline prices have to drop, along with all commodities, according to this amateur oil analyst.  Reasons are provided as to why heating oil, natural gas, XOM and other large oil companies will see a move down.  While quite dubious, the reasons are claimed to be the fundamentals that will drive the oil market, along with consumer spending thrown in for good measure.

X

A prediction that oil will rise to somewhere between 50 and 70 in the coming months is offered.  Disgust with the market and the financial press with respect to Contango is also provided.

X

A contrarian counterpoint to the positive CNBC analyst spin on the oil market is posted.  The counterpoint is that oil is “going nowhere” and that a breakdown is going to occur very shortly.

X

A link to an article suggesting that Contango cost USO holders 12% in January is posted in our next entry. 

The conclusion  is that the U.S. 12-Month Oil Fund (NYSE  Arca:USL) is a better way to invest in oil.  The difference between the two funds is that USO only holds the front-month contract, while USL holds equal portions of the next 12-months of crude contracts. 

We’ve observed that DXO, and exchange traded note holding June or July contracts, also held up better than UCO, which we only assume holds something closer to front-month contracts.

X

Meanwhile, a technical analyst says that a descending triangle has formed on the 3-month US Oil Fund chart.  The claim is made that descending triangles usually resolve to the downside.  We aren’t sure that this is the case (it depends on the price action before the triangle is formed actually), but the outlook provided is a very negative one.

X

In this next brilliant post, a suggestion is provided to big oil.  Cut prices rather than attempt to create a shortage.  The idea is deemed to be a genius marketing move designed to help big oil increase demand.  It is not clear where the sentiment lies here, so we can’t provide a bullish or bearish rating upon which our contrarian oil indicator is calculated.

X

Oil was up today at one point, but this investor’s ETF choice wasn’t heading higher.    Projected OPEC production cuts weren’t impacting futures markets much.  This observation seems to be a contradiction.  Further, he mentions that OPEC members cheat on production quotas, but also suggests that cuts will hurt in a year.  Where does he stand?  We aren’t very sure.

X

A bullish post citing a Reuters article that futures had risen to over $42 a barrel on the heels of the news that OPEC may cut output even further in an effort to stabilize oil prices.  A nod to the pending economic stimulus package is also provided, resulting in optimism over the economy.   The reason for the post is a belief that it will prod investors on the fence into buying oil, influencing the price in a positive manner.  If true, the investor is naïve, but he clearly states in his disclosure that he is very long oil.

X

The geo-political situation is analyzed by our next guru on record.  He says that Israel needs to put an end to Iranian nuclear ambitions and offers an unrelated article about the Taliban as proof.  Perhaps it was proof of his statement that one can’t reason with Islam (the article was about a Polish hostage that was killed).  It is safe to assume that this poster’s intent was to suggest tensions will flare, causing oil traders to drive crude futures higher.

X

A technician says we will make another run, breaking below critical support levels.  He didn’t provide a direction (it was trading around his stated support), but based on the timing and the price action in the fund, we will say he was short-term bearish for our contrarian calculation.

X

In the next entry, a comparison between USO, XLE and OIH is made, with an observation that Contango will hurt USO because it is “deleveraged to the price of oil” (whatever that is supposed to mean).  USO moves closer to the price of oil than OIH was the conclusion.  Where has this guy been?  He must have missed the current USO versus USL debate.

X

Another observation that USL is a better way to play oil than USO is offered up.  This time, the reason is simple:  USO is lagging.  IndexUniverse is provided as the source.  All the USO / USL posts are flagged as bullish, since all seem to be seeking the optimal way to invest in, or trade, oil from a bullish perspective.

X

Prediction:  Oil Going Up

X

A new long position in a popular exchange traded fund for trading oil is posted.  The trader did not want to disclose his stops for unstated reasons.

X

Meanwhile, a chart pattern trader observes that a bottom has been established.  A 50% move to the upside is projected for an ETF, and by extension, for oil.

X

More geo-political drama is detailed for us, as Nigerian rebels begin to move on a Shell Oil plant.  We assume here that the intent of the post was to remind us that futures can move sharply higher on events like this, although it really didn’t following this particular post.

X

Our next analyst let’s us know that he has a feeling about the next move in oil prices.  That move happens to be higher.

X

Another strategist suggest that oil prices are way too low, and that if he were running the nation’s energy policy, he would have the treasury print dollars and buy up all the available oil.

X

We are next treated to the pronouncements of RGE analyst Nouriel Roubini, which of course means dire predictions of depression.  The conclusion by the poster is that oil, gas and commodities will all head to new lows.

X

In the following post, we are told that Roubini is a fraud.   He predicted a recession for 4 years straight, so we are told that he was wrong 4 years in a row, causing his status as an economic forecaster extraordinaire to be somewhat questionable.

X

A link to 15-minute delayed quotes is offered, with no commentary allowing us to ascertain the intent.

X

Next we get a humorous post about President Obama’s nomination for the next Health and Human Services Secretary.

X

Finally, we get back to short-term oil trading, but no opinions are offered.  Futures contracts and their prices are provided, along with an attempt to calculate the appropriate price for an Oil ETF.  No opinion offered as to the next trend, or a good trade.

X

OIH rears its head again though, with a new position claimed.  The trader holds USO as well and believes he is ready to participate in a big energy move.

X

A bullish, albeit in hindsight, article excerpt from Bloomberg is posted, discussion the price of crude futures and providing a variety of fundamental and speculative reasons for the early morning rise in oil.  Tom Bentz, a senior energy analyst at BNP Paribas in New York is quoted as stating that the upcoming stimulus package is providing optimism to futures traders that demand for oil should rise.

X

Frustration is a key feature amongst amateur traders.  We choose to call frustration, even from a professed bull, a bearish post.  Frustration arises before one is stopped out, or psyched out, as the case may be.  It precedes a sharp drop, even if followed by a snap-back rally.

X

The next poster types in all caps.  He expects oil prices to rise quickly.  We’ve thought about giving all-cap posts double points, but will keep our contrarian indicator for oil clean at this time.

X

We get a more serious missive in our next entry, although it doesn’t seem to make a lot of sense.  A claim that Nigerian rebels will be killed is made and that things will soon turn ugly.  Sentiment in the disclosure is bearish though.

X

The upcoming stimulus package is projected to push oil up over 30%.

X

The previous entry is countered by an options trader who claims that the call volume in an oil ETF projects up to a 10% drop in the oil prices.  We don’t know if his analysis is any good or not, but he claims to be looking at Put/Call ratios as another contrarian indicator.  This is the more traditional read on investor sentiment.

X

How should we read political entries?  Our next commentator is miffed that Republicans will block the stimulus package.  How this impacts our subject asset class is not explained.

X

We get more agreement that USL is a better way to buy oil than USO.

X

Once again, frustration with USO is expressed, and another USO investor hops on the USL bandwagon.   The tone of this post leaves us wanting to mark this as bearish frustration, but as long as he is going to jump into another oil investment, we have to keep him bullish.

X

Our entry two posts back is duplicated, with a different price level.  This poster is giddy bullish over his new-found investment choice.  USL is the answer to his long trade dreams.  This should be deemed double bullish, and is the best kind of contrarian indicator.

X

Oil rises into labor day according to our next analyst.  No reason is provided.  Should we take him at his word?

X

We finally find a poster who is not so enamored with USL, calling it a scam and suggesting that US Oil traders not fall for it.  Is he in love with his current USO holdings?  That is always a dangerous thing.  We aren’t sure what to call this one.  He isn’t commenting on oil, only on an oil ETF it would seem.  He is bullish USO though, so we will say bullish oil for our contrarian indicator calculation.

X

A chartist provides more evidence that USL is a better way to go.  This shift from USO to USL is rather dramatic and leaves us conflicted.  If they are all leaving USO, that is bearish our tracking vehicle, yet we have chosen to call a jump from one to other bullish.  The eye has been taken off of the oil futures themselves.  This may be the breakdown in our model.

X

A volume discussion, with a suggestion that the new ETF of choice for traders on this board are now panic buying, creating a premium in the share price.  This dispassionate investor remains skeptical and we will have to call this bearish, at least for USL.

X

Now, in our next post, we are back to the news of the day that we thought we would be discussing, the Oil Production cuts.  Output reductions should ultimately limit the supply of oil, pushing futures higher.

X

Another warning abut the rising premium in USL is provided.  This is another trader that realizes what may be happening to the amateurs.

X

Another simple, bullish statement that oil will rise, as will USO.

X

According to our next subject, the IMF says a depression is coming and that commodities will drop hard.  A link to a Motley Fool article is provided as proof.

X

A discussion as to the mechanics of rollovers for futures contracts is proffered, with the effects on Oil ETF performance.

X

USO has bottomed short-term, although it could drop, according to this wishy-washy trading genius.

X

Spot prices, future contracts and other elements of the futures trading are discussed, with the conclusion being that a particular ETF feels like a Ponzi-scheme.

X

Demand for oil is down, and nobody wants it, is the conclusion of our next author-analyst.  His alternative investment vehicle of choice is General Motors.  We don’t get it either, but there it is.

X

Calculate the price of USO if the April Oil Futures contract on NYMEX falls to $40 per barrel, and things don’t look too pretty for long oil traders.

X

Another poster claims USO is flawed.  We are too tired to figure out why.

X

Observations about the apparent disconnect between gas and oil are offered.  They have decoupled.  No sentiment indicator is provided.

X

Thanks for all the discussion about USO and USL.  This greatful poster is still trying to figure out which fund is better for going long.  He is clearly bullish.

X

 Total

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